Rating Bureaus Collaborate on Nationwide ‘Mega Claims’ Report

Nancy Grover

Oakland, CA (WorkersCompensation.com) – Are there more ‘mega claims’ in workers’ compensation these days? And are claims reaching that status earlier than they used to? The questions have prompted stakeholders to look closely at claims throughout the country for the answers.

“With medical advances, improving mortality patterns particularly for those with serious injuries, increasing prevalence and cost of home healthcare and reform related cost reductions in some states that have less impact on these mega claims than other claims, stakeholders have suggested that the relative frequency and cost of these claims may be increasing,” says a new report. “In response, a number of workers’ compensation rating bureaus have collaborated to conduct a comprehensive analysis of these mega claims across the country.”

Those included are the Workers’ Compensation Insurance Rating Bureau of California, Delaware Compensation Rating Bureau, Indiana Compensation Rating Bureau, Compensation Advisory Organization of Michigan, Minnesota Workers’ Compensation Insurers Association, National Council on Compensation Insurance, New Jersey Compensation Rating and Inspection Bureau, New York Compensation Insurance Rating Board, North Carolina Rate Bureau and Pennsylvania Compensation Rating Bureau.

Mega claims are defined in the report as those with incurred losses at 2018 cost levels of at least $3 million.

Among the principal findings are:

  1. Approximately 4,500 claims from accident year 2001 through 2017 were reported as of December 31, 2018 with incurred loss in excess of $3 million at 2018 cost levels, which is approximately one out of every 2,500 reported indemnity claims. Of those, 57% were between $3 million and $5 million, 33% between $5 million and $10 million and 10% in excess of $10 million.
  2. The rate of reported mega claims dropped sharply during the Great Recession as construction employment plummeted in most of the country. Since 2013, the share of mega claims has increased steadily.
  3. Reported mega claims for accident years 2016 and 2017 were up significantly from prior years, although some of the increase may be attributable to insurers being able to identify such claims earlier. In any case, estimated ultimate accident year 2017 mega claim counts were at a 12-year high. However, estimates of ultimate counts of mega claims for relatively immature years can be volatile.
  4. Mega claims from the construction sector comprise approximately 40% of mega claims in the experience period. In contrast, less than 20% of all indemnity claims arise from the construction sector.
  5. Mega claims arising from brain and head injuries comprise 17% of mega claims between $3 million and $5 million, but 30% of claims in excess of $10 million. These claims comprise well below 5% of all indemnity claims in most states.
  6. Motor vehicle accidents give rise to more than 20% of mega claims, but 5% or less of all indemnity claims in most states.
  7. Claims often take some time to breach the $3 million threshold. Less than one-half of mega claims reach the $3 million threshold by 18 months from policy inception, and less than 90% reach that threshold by 126 months from policy inception. However, mega claims are generally reaching the $3 million threshold more quickly than in the past.
  8. Mega claims arising from the construction sector reach the $3 million threshold more quickly than those arising from the office/clerical sector. Similarly, mega claims arising from motor vehicle accidents, “struck by object” injuries, and head and brain injuries reach that threshold more quickly than other mega claims. In contrast, mega claims involving strain and sprain injuries reach the $3 million threshold more slowly.
  9. On average, it takes longer for claims in both California and New York to reach the $3 million threshold than in other states

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